Preparing for Retirement in Your Younger Years

February 1, 2016

The expression “50 is the new 30” takes the sting out of middle age, right? Nothing wrong with that, except for when it comes to preparing for our senior years – specifically, facing the facts around how we’ll cover our living costs. With one in four of 65 year-olds today living past the age of 90, and the average person living 17-20 years past traditional retirement age, most of us benefit from a healthy sense of urgency around planning for what could be decades of post-retirement living. And with a growing number of seniors considering a move to independent/assisted living communities, financial preparedness no longer necessarily means estimating the costs of staying put; it may involve a move into a senior community.

Regardless, it’s never too early to start thinking ahead, no matter how young you feel. So by all means, get on that dating website and book those skiing lessons – but take these steps first:

  • Define what retirement means for you: List your top five goals first, and be as specific as you can. Do you dream of biking tours abroad? Visiting all 59 national parks ? Relocating to a warm climate, or staying close to family? List priorities without a budget at first; this will help you get clearer on where and how you see yourself living out the next phase of your life.
  • Take stock of your assets: Along with income, account balances and retirement savings, do you collect anything potentially valuable? We heard recently of a woman who unexpectedly inherited her brother’s microphone collection. It meant little to her, but ended up scoring an unexpected windfall once she shopped it out to professional musicians. Or perhaps you have a marketable skill like playing an instrument, or financial expertise; that kind of knowledge base could be parleyed into part-time teaching or consulting.
  • Take a stab at a retirement budget: This step can feel tricky, but there are lots of online resources to help, including retirement calculators from MarketWatch and AARP. The general rule of thumb is to track income and expenses for 3-4 months to get a clearer sense of what your accustomed lifestyle costs are. Adding in debts and costs associated with your retirement goals, you start to get a picture of how far inside the ballpark you might actually be.
  • Think of new ways to save: Look back at your bills with an eye for easy things to eliminate (like those 500 cable channels – really?). We can all get lazy when we don’t hold ourselves accountable; so count the number of meals eaten out per week, and cut it in half. Add up those commuting costs, and consider biking to work. Check out LifeHack and Real Simple for more ideas on minimally-painful cost-cutting ideas.
  • Invest in long term care insurance (LTCI): The average couple retiring in 2014 can expect to pay between $220,000 and $240,000 in out-of-pocket healthcare costs over the rest of their lives – and those figures don’t include the long term care costs associated with assisted living, nursing home care, and other non-Medicare covered expenses. Considering the fastest-growing population in America is 85 and over, it’s wise to consider yourself part of that scenario and plan accordingly. Get educated on LTCI – the plans that are available, any restrictions they have, and which ones cover assisted living (not all do). Some good resources here are A Place for Mom and the New York Times.